Monday, April 7, 2014

State carbon taxes in the works?

Adele Morris, fellow and policy director for Climate and Energy Economics at Brookings, has posted on the Brookings Tax Policy blog, TaxVox, a discussion of the possibility that the EPA, in issuing a proposed rule due out in June on what states may do to reduce greenhouse gas emissions under section 111(d) of the Clean Air Act. She thinks that EPA should, and maybe could, allow states to implement a state carbon tax to comply with whatever rule EPA issues in June. There is much unexplored territory here, and I expressed skepticism as to whether a statute that is fairly detailed in its prescriptions, and that has been interpreted by courts to be restrictive in its menu of allowable policies, could be interpreted to allow for something as radically flexible and sensible as a carbon tax. I remain skeptical, but hopeful. It would be politically meaningful if some red states actually seized on a carbon tax as being more efficient and sensible than the usual command-and-control-like standards issued under the Clean Air Act, while Congress continues to fight last century's fight (whether climate change is a problem or not), and continues to oppose carbon taxes on emotional grounds, not economic ones.

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What does administrative law say about imposing regulations that are entirely useless in achieving their intended goal? If Indiana imposes a carbon tax, for example, nobody thinks that will affect global warming in any measurable way. Does the regulation have rational basis then? This was perhaps addressed in EPA v. Mass., but I don't remember.

Posted by: Eric Rasmusen | Apr 8, 2014 7:04:50 AM

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